Definitely, also as mobile payments technology to become more popular, it also can help detect fraud quicker, i.e. a bank sending someone a SMS message about a possible a fraudulent transaction, as oppsed to a phone call, or , forbid, a letter.

Security is one of the areas that the Fed is looking at in examining faster payments. Definitely will need to have fraud monitoring systems in place that are capable of handling the volume and velocity of transactions.

How true. Everyone wants speed, but with speed there is a bigger opportunity for fraud and scams. I don't see the quest for faster payments going away, though. Instead, I think banks will need to do a better (faster) job on the clearing side. It can be done and the technology is available, but banks have to be willing to make the investment.

As a financial crimes investigator, I have no problem with speeding up transactions as long as you can speed up the verification of funds side as well. Currently I get several calls from bank investigators each week regarding forged checks. Everyone assumes that if a check is paid out that it has "cleared". This is why overpayment scams and secret shopper scams are so successful. The bad guys count on the check being paid out and the victim sending the money on before the bank is told that the check or account was no good. Then the bank victimizes the scam victim by freezing their account when all the bank had to do was wait for the funds to truly clear.

Yeah I think the point about wire fees in the article is especially relevant. Banks are really going to want to protect that fee income, and unless they feel pressure from customers to speed up payments, there really isn't an incentive for them to try and participate in this. A lot of arm twisting is the only way to get this done.

I was under the impression that the UK was doing a sort of staged rip and replace, and they were taking out the ACH. Thank you for correcting me on that. You make a great point about the current U.S. system sliding backwards by the day. The Fed says it will take at least 10 years to replace the current system, so you wonder what kind of state we'll be in by the time they actually finish the project. Likely the speed of innovation could pass by whatever is implemented by the Fed in that 10 years.

Great insights here. There are many issues and players involved here, and each seem to be moving in different directions. Whatever "solution" is selected, it is going to take a lot of work (and some arm twisting) to get everyone on board.

To clarify, the UK didn't truly rip and replace. Whilst undoubtedly new work was required (I worked on the programme), equally it leverages both the existing ATM network and the ACH infrastructure. The US faces a bigger challenge because of size obviously, but equally the ACH network*s* are starting far further back in terms of features and functionality. The analogy is perhaps the dilemma the fixed-line telco industry faces. It faces increasing competition - mobile, cable companies, etc, yet is seen as utility and unsexy. It has the choice of tweaking the copper it has laid decades ago to eek out more bandwidth, or it can start laying fibre at huge cost, and look to the future. Over a 10-20 year period, cost aside, the answer is obvious. But signing off the bill today, and figuring who pays is very different. So the current ACH system maybe old but is fit for purpose; equally, on a global basis, it's score card is probably D-, and sliding backwards on an almost daily basis. Many of the complaints we hear about ACH in the US are actually unique to the US because of the system. Perhaps a rip & replace would not only achieve real-time, but also fix the broader issues too.

PayPal already offers real-time payments, but until you see a lot of people moving more transactions to PayPal from their banks, the banks won't be incentivized to change. Of course, by the time that people start moving those transactions to PayPal it might be too late for the banks to get things done.

It could hypothetically and we've seen some banks achieve faster payments riding the ACH rails. I think the Fed has kind of gotten caught up in the examples of the countries that have gone a rip-and-replace route like the U.K. They see the success that the U.K. is having and see a lot of potential there as a result of what they're seeing. But they're still in the exploratory phase of figuring things out, and it's too early to tell how they're going to go about it.